Politics clashes $ 20 billion Canadian shopping trip to Paris

Photographer: Jeremy Suyker / Bloomberg

Alimentation Couche-Tard Inc. founder Alain Bouchard hopes to save $ 20 billion bid Carrefour SA when it arrived at the French Ministry of Finance, whose headquarters protruded like an aircraft carrier in the east of Paris across the Seine.

After waiting for a brief hearing with Finance Minister Bruno Le Maire, he received the message: The proposed deal was dead on arrival, torpedoed by the French political opposition.

The meeting on Friday concluded a turbulent week for Couche-Tard and Carrefour. Bouchard, a self-made billionaire who turned a dark Canadian gas station operator through acquisitions into an empire of 14,200 retail stores, wanted to take the next step. By buying the French grocer, Couche-Tard would have become a global retail giant Walmart Inc.

The opening only ended four days after it came to light, and the companies said they would rather seek a looser alliance and send Carrefour shares down 7.6% on Monday. Surrendering one of France’s largest supermarket owners to foreign ownership was impossible at a time when the closure of Covid-19 emphasized the strategic importance of the country’s food supply, Le Maire said.

Couche-Tard is not the first foreign acquirer to be halted by French concern over economic sovereignty, but it underestimates the flag wave reflexes that have intensified amid Covid-19. With regional elections looming later this year and a presidential election for 2022 allowing the country’s largest private employer to fall into foreign hands, nationalist leader Marine Le Pen and leftist Jean-Luc Melenchon could give a new case to the centrist to attack President Emmanuel Macron. .

Bad timing

“This was not the time to make such an agreement,” said Fabienne Caron, an analyst at Kepler Cheuvreux. “The government has lost much more than it has won. The real reason is politics. ”

The companies exacerbated their miscalculation by blinding Le Maire and Macron. According to a Finance Ministry official, the finance minister reported late Tuesday via a text message from Carrefour CEO Alexandre Bompard, referring to government rules. It was around the time Bloomberg News appeared report reveals the conversations that evening.

Read more: Couche-Tard faces investor braai if Carrefour deal fails

This article is based on interviews with people familiar with the discussions and the position of the government, who asked not to be identified due to the sensitivity of the matter. Representatives of Carrefour and Couche-Tard declined to comment.

Talks between the two companies began in the fall after Couche-Tard tried not to buy Marathon Petroleum Corp. ‘s Speedway filling station network. Previous acquisitions have built Couche-Tard from one store in a suburb of Montreal to an operator of convenience stores stretching from Texas to Hong Kong.

Carrefour, the most well-known of the giant stores outside the city, which sells everything from baguettes to T-shirts to grass seed, has been challenged by the increase in online shopping and the growth of the cheapest Lidl and Aldi. Under Bompard, it scaled down its hypermarkets while investing in convenience stores, e-commerce and organic food, but shares fell more than one-third over its 1 1/2-year term before Tuesday’s news broke.

Friendly talk

Later that evening after the leak, both companies confirmed the discussions and stressed that the negotiations were friendly. The next day, Carrefour’s stock rose, with Couche-Tard confirming that it weighed 20 euros a share.

In government quarters, however, the opposition was growing. Le Maire met with Bompard on Wednesday afternoon as well as key Carrefour investors such as LVMH chairman Bernard Arnault, who owns a 5.5% stake. Late in the day, the finance minister said on television that he opposed the agreement.

An Arnault representative did not respond to a request for comment.

Carrefour’s advisers and some analysts see an element of posture in Le Maire’s hard line, thinking the finance minister would eventually yield. They had reason to believe that this agreement could be seen differently as a 2005 approach PepsiCo Inc. to the French yogurt manufacturer Danone SA, which was blocked on the grounds of sovereignty.

Macron is, after all, a former Rothschild banker who took office four years ago with a vow to shake up a French economy held back by state intervention. Couche-Tard hails from Quebec, which shares close linguistic, cultural and business ties. And Carrefour could use a partner with a deep pocket to fund its incomplete turnaround.

In 2019, France led European countries in a ranking of foreign investment projects by the accountants EY. Its companies have also intensified their overseas expansion, while LVMH recently announced its $ 16 billion acquisition of Tiffany & Co. completed. However, some French champions have stumbled – most notably drugmaker Sanofi, whose Covid vaccine project faces a months-long delay dosage problem during tests.

Couche-Tard was prepared to respond to French concerns with commitments to pump 3 billion euros ($ 3.6 billion) into Carrefour, while guaranteeing jobs and promising to retain the French retailer’s headquarters, as well as the to list shares of the combined companies in both countries.

‘Big problems’

Le Maire apparently opened the door slightly during a conference when he described Carrefour acquired by a foreign entity as a ‘major problem’. By Friday morning, he was trying to clear up any ambiguity and stated in a morning TV appearance that his position on the Couche-Tard approach was a ‘clear and definite no’.